Presentation Transcript

1. Escalation of commitment in SMALL BUSINESS sales management: when persistence may not be the best course of action

   Jeremy A. Woods University of Cincinnati
2. The Cost of Escalation Escalation of Commitment: Sustained commitment to a failing course of action (Staw, 1976, 1981; Staw & Ross, 1978, 1978). Costs of Escalation of Commitment in Sales Management: Time. Energy. Sales Budget. Dried up Sales Pipeline. Underperformance. Bankruptcy.
3. + Perceived Efficacy of Resources + Ideal Customer Vision Perceived Probability of Future Success Perceived Persistence of Cause of Setback + Commitment to a Course of Action Escalation of Commitment - Perceived Value of Future Success + Extending Staw (1981) – Ideal Customer Vision ________ Staw, 1981 Proposed Extension
4. + Perceived Efficacy of Resources + Activity-Oriented Sales Goals Perceived Probability of Future Success Perceived Persistence of Cause of Setback + Commitment to a Course of Action Escalation of Commitment - Perceived Value of Future Success + Extending Staw (1981) – Activity-Oriented Sales Goals ________ Staw, 1981 Proposed Extension
5. Small Business Owner-Managers High dependence on single/small group of decision-makers (Feltham et al., 2005). High emotional attachment to business (Gómez-Mejia et al., 2007). Long-term dependence on single/small group of decision-makers (Gersick et al., 1997). Reduced internal debate about strategic decisions (Ensley, 2006; Kellermanns & Eddleston, 2004; Zahra et al. 2004).
6. Salespeople Attribution of failure to a lack of sufficient effort tends to lead to continuing pursuit of a sales prospect (Sujan, 1986). Attribution of failure to unstable causes tends to lead to continuing pursuit of a sales prospect (Johnston and Kim, 1994).
7. Escalation of Commitment (Staw, 1981) Higher perceived efficacy of resources leads to higher perceived probability of future success, which leads to escalation. Lower perceived efficacy of resources leads to higher perceived probability of future success, which leads to escalation. Higher perceived value of future success leads to escalation.
8. H4 - H3 - + Perceived Efficacy of Resources H1a - + Ideal Customer Vision Perceived Probability of Future Success Perceived Persistence of Cause of Setback + H1b + Commitment to a Course of Action Escalation of Commitment - Perceived Value of Future Success H2 - + Hypotheses – Ideal Customer Vision ________ Staw, 1981 Proposed Extension
9. H8 - H7 - + Perceived Efficacy of Resources H5a - + Activity-Oriented Sales Goals Perceived Probability of Future Success Perceived Persistence of Cause of Setback + H5b + Commitment to a Course of Action Escalation of Commitment - Perceived Value of Future Success H6 - + Hypotheses – Activity-Oriented Sales Goals ________ Staw, 1981 Proposed Extension
10. Methods Sample of 40 small business owner-managers. 75% of respondents male. Over half of respondents age 40-49, another third age 50-69. 77.5% of respondents had an ownership stake in their business. Half of the companies (47.5%) were family businesses. Half of the companies (50%) had 5 employees or less; largest 10% had over 100 employees. Company industry and size profiles representative of national SBA averages (Marshall et al., 2006). Pilot survey instrument. Hypothetical decision-making scenario (continue to pursue big fish sales prospect or switch to pursuit of smaller new ones), with survey questions to measure dependent variables & covariates. Independent variables measured based on ACTUAL sales management practices (survey questions).
11. Independent Variables – Ideal Customer Vision “My company has a clear definition of the customer needs which we fulfill.” “My company has a clear definition of our competitive strengths compared to the customer’s other purchasing options.” “My company has a clear definition of our competitive weaknesses compared to the customer’s other purchasing options.”
12. Independent Variables – Activity-Oriented Sales Goals “My company sets sales goals based on amount of time spent with sales leads.” “My company sets sales goals based on total number of sales leads.” “My company sets sales goals based on the amount of time required to close a sale.” “My company sets sales goals based on the number of sales leads in different stages of the purchasing decision process.”
13. Results (MANCOVA & Log. Regression) H1a: Partially supported. (3 individual measures significant, but in OPPOSITE direction. Scale measure not significant.) H1b: Partially supported (3 individual measures significant, but in OPPOSITE direction. Scale measure also significant, also in OPPOSITE direction). H2: Not supported. H3: Partially supported (scale measure significant, but only in interaction with Gender & Age). H4: Not supported.
14. Results (MANCOVA & Log. Regression) H5a: Not supported. H5b: Partially supported (Scale measure significant, but in OPPOSITE direction and only in interaction with ownership stake and family nature of business). H6: Not supported. H7: Not supported H8: Fully Supported. (Wald = 3.359, P < .067, B = -.160, Exp(B) = .852, Minus 2 LL 25.366, Nagelkerke R-square .601).
15. Discussion & Future Research Pilot instrument needs to be refined Decision-making scenario did not contain information on whether or not target customer matched respondents’ ideal customer vision & activity-oriented sales goals. Decision-making scenario had poor information content on resources & causes of the setback. Respondents instructed to answer questions on escalation antecedent constructs based on chosen course of action, not based just on continued pursuit of the big fish. NEXT STEPS In-depth case studies with small business owners to refine survey instrument. Rollout of survey instrument to larger, more representative sample.